What Are Federal Income Taxes?
Working Americans are required to pay federal income taxes on their income every year. These taxes are collected by the Internal Revenue Service and used by the federal government to pay for federal workers' salaries, military defense, education, welfare and other social programs. Failure to pay your federal taxes can result in harsh penalties.
Other People Are Reading
-
Tax Brackets
-
The federal tax system is progressive, which means that the more money you earn, the higher your tax rate will be. Federal income taxes are divided into tax brackets, beginning at 10 percent of your income.
Paying Your Taxes
-
Unless you are self-employed, your employer typically withholds federal taxes from your paycheck and sends the money directly to the IRS. Self-employed individuals must make quarterly estimated tax payments equal to the taxes they expect to owe at the end of the year.
-
Filing
-
Your employer will mail you a W-2 form at the beginning of each calendar year listing your earnings and taxes withheld from your paychecks during the previous year. A copy of your W-2 form is sent to the IRS to ensure that your income is reported and any taxes you owe are assessed correctly.
Tax Credits and Deductions
-
Many taxpayers qualify for tax credits or deductions. Both will help you lower your tax liability. Certain tax credits may result in your having a negative tax balance, in which case, the government will send you a refund for overpaid taxes.
Considerations
-
You can prepare and file your own taxes but to ensure that you are paying the lowest amount legally possible, you may choose to have an accountant or tax professional prepare your forms for accuracy and make sure you receive all tax credits and deductions to which you are entitled.
-
Resources
- Photo Credit Jupiterimages/Photos.com/Getty Images
